Well, the answer is a little more complicated than what we’ve seen so far. The inquirer uses terminology which suggests he might be British, and that makes the answer even more complex.
Essentially, there are two methods for signaling: Route signaling and speed signaling. The former is used in Great Britain; the latter in North America. Thus, an English interlocking mast might use three heads where an American mast would use only two, reserving the third head for an additional indication, the “call on.”
Let’s start with placement: First thing to do is identify all of the railroad’s interlocking plants. These are areas where switches bring routes together but not necessarily provide access to lineside industries.
Whatever system one uses, interlocking plants must be protected with absolute stops – to prevent “cornfield” meets. Those stops must be time-delayed to prevent a train from receiving a stop signal too late to actually stop. In North America, interlocking signals have the heads stacked atop one another, so that the signal’s aspects would appear in a vertical row. Using a three-headed signal for reference, the aspects would be:
Red over red over red: Absolute stop;
Green over red over red: High-speed clear;
Yellow over red over red: High-speed approach;
Red over green over red: Medium-speed clear;
Red over yellow over red: Medium-speed approach;
Red over red over green: Low-speed (switching) approach;
Red over red over yellow: Call on (be prepared to stop at any sign of any obstruction).
Also, many railroads today use four-block signaling, incorporating e.g. flashing yellow, which indicates that the next signal is yellow, not red, and that trains over a certain weight must slow down sooner.
Open country is protected by block signals, not interlocking signals, and for these there is only the single head:
Red (stop);
Flashing red (permissive stop/call on)